Chavdar Vasilev is a journalist covering the casino and sports betting market sectors for CasinoBeats. He joined CasinoBeats in May 2025 and reports on industry-shaping stories across the US and beyond, including legislative debates, market...
Read Full BioCoinbase has sued the gaming regulators of Illinois, Michigan, and Connecticut over their efforts to block sports-related prediction markets, arguing that the products fall under exclusive federal oversight.
The company filed all three lawsuits on December 18. Coinbase’s Chief Legal Officer, Paul Grewal, publicly shared on social media the Illinois lawsuit, filed in the U.S. District Court for the Northern District of Illinois. The complaint seeks to block state officials from enforcing gambling laws against federally regulated event contracts.
Coinbase’s involvement now means that the legal conflict between state regulators and prediction market operators has spread to 10 states.
Coinbase: Federal Law Preempts State Gambling Laws
In the Illinois complaint, Coinbase argues that the Commodity Exchange Act grants the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over event contracts traded on federally registered exchanges.
“The CFTC’s exclusive jurisdiction and that comprehensive federal regulatory framework leave no room for Defendants to graft on Illinois law to expose Coinbase to grave civil and criminal liability for facilitating federally regulated transactions,” the company states.
Coinbase maintains that the sports-related contracts at issue are derivatives — specifically “swaps” — that only the CFTC may regulate.
Illinois regulators, however, like in multiple other states, have taken the position that such contracts constitute illegal sports wagering.
“Defendants have consistently and repeatedly made clear that they believe sports-related event contracts listed on a CFTC-registered exchange may be offered and sold only by firms that have obtained a license from the Illinois Gaming Board,” the complaint states.
Coinbase’s complaint closely mirrors the legal arguments raised by other prediction market operators and intermediaries. They have consistently argued that federally regulated event contracts do not fall under state gambling laws.
The preemption question remains unsettled. In late November, a federal judge in Nevada dissolved a preliminary injunction that had blocked state enforcement against Kalshi. The judge concluded that Nevada’s regulatory interests outweighed Kalshi’s claimed harms. That decision is now on appeal before the Ninth Circuit.
With multiple cases moving through different federal circuits, many industry observers believe the issue might ultimately reach the U.S. Supreme Court.
Enforcement Threats & Alleged Irreparable Harm
The lawsuit details cease-and-desist letters Illinois issued to Kalshi, Robinhood, and Crypto.com. It warns that entities that “participate in or facilitate” sports event contracts without licensure are “engaged in illegal gambling.”
Coinbase argues those threats leave it with no viable option.
“Coinbase must either risk exposing the company to significant civil (and potentially even criminal) liability or refrain from offering access to event contracts in Illinois,” the company states.
The filing further warns that enforcement action would immediately damage Coinbase’s reputation and disrupt relationships with millions of customers.
Filed One Day After Prediction Markets Announcement
Coinbase filed the three lawsuits just one day after it announced its entrance into the prediction markets sector through a partnership with Kalshi.
Coinbase now joins cryptocurrency brokerage rivals Crypto.com and Gemini, as well as Robinhood, to offer event contracts. With the expansion, Coinbase aims to become an “everything exchange,” much like Robinhood has expanded beyond its stock brokerage business.
Coinbase Financial Markets is registered as a Futures Commission Merchant. The company states that all contracts will trade exclusively on a CFTC-designated exchange.
Litigation Now Spans 10 States
With the lawsuits in Illinois and Michigan, the number of states involved in litigation over prediction markets has grown to 10. Connecticut is already in litigation with Kalshi.
The other states include Maryland, New Jersey, Ohio, Nevada, Massachusetts, and New York. Additionally, Native American tribes have filed lawsuits against prediction market operators in California and Wisconsin.
Coinbase’s complaint warns that allowing states to regulate these products individually would undermine Congress’s intent.
“Permitting States like Illinois to encroach on the CFTC’s jurisdiction would frustrate Congress’s efforts to guarantee nationwide uniformity in the futures market,” Coinbase states.
